Emotional investing clouds judgement and forces your to make irrational decisions — things you would not have done in an objective and disciplined state of mind.  We all have these feelings from time to time.  Have a look a the list below and spot areas of improvement in your own trading.

You refresh your portfolio summary page every few minutes like you do your e-mail inbox.

You get excited when you get a big tip from someone on a stock you know nothing about.

You call your broker or mentor more than once a day to find out what is opinion is about your holdings.

You sell out your whole position when it gets downgraded by an analyst.

You want to sell out of your whole position every time the instrument slips just a few cents.

You start celebrating your profits when they are still unrealised gains.

You start contemplating what you are going to buy with those unrealised profits.

And you get annoyed at yourself when those unrealised gains diminish the next day.

While watching your real-time ticker you see your stock fall and ask yourself “why me?” over and over again.

You place minute/too small stop losses because you cannot bare ‘big’ losses, and then get stopped out too often.

The most valuable advice that I have ever received was quite simple: “Don’t just look at the chart… Trade it.”

10 Best Tips for New Traders

1. Patience: Learning to trade doesn’t happen overnight. You need to be patient and spend some time on this. It takes effort to be a successful trader.
2. Losses: As a new investor, be prepared to take small losses. You need to find your feet in the market. And you learn through this process. When you paper trade you are not emotionally involved.
3. Stops: Always have a stop loss in place. When the position goes against you, you should not hesitate to cut it. Never just stick your head in the sand and hope for the best. Hope is not a strategy.
4. Gearing: It is not necessary to overexpose yourself. Especially when you are just starting out. You can gear at a ratio of 1x or 2x your available capital. There is no need to bet the house on your first few trades.
5. Focus: Concentrate your efforts and get to know a few high-quality trading stocks. There is no need to try and trade everything.
6. Penny stocks: Just because something is cheap doesn’t mean that it is better value. When you trade you are looking for movement. The top shares on the market are more and trade all the time – but the penny stocks might only trade once a day. Start thinking in terms of percentages.
7. Technicals: Use charts to determine entry and exit points. Always have your entry, profit and stop loss levels written down for each trade. And do not hesitate to take action when you reach these levels.
8. Indicators: Just because a charting package has 100’s of indicators it doesn’t mean you should use all of them. Remember, they are only derivatives of what happens to price. Keep it simple. Start off with candles, volume, trend lines, one momentum indicator and basic formations.
9. Fundamentals: This analysis looks at a company’s earnings, earnings growth, sales, profit margins, and return on equity among other things. It helps to know about the new contract your company just signed or the strikes or layoffs they are about to face. Keep track of the stocks in your watch list – it can be as simple as just looking at the company headlines on your Bloomberg mobile on your phone every day.
10. Emotions: Do not force your trades. Sometimes the best trade might be to do nothing. At the same time, do not just sit and let trades pass you buy. Don’t be afraid to take them – remember, you are protected with your stop in place.

10 Tips for Successful Trading

Change your mindset.

Trade together with momentum. Look at the charts. Don’t trade according to what you believe should be the correct position economically.

Questionable adage.

We have heard “buy low and sell high” numerous times before. But often a more correct approach would be to buy high and sell higher, as the price goes from strength to strength. Just keep a tight stop.

Which way today?

In a bull market one should be long. In a bear market ones should be short. Choose the strongest and weakest shares for each market. Don’t be caught on the wrong side. Trade with the momentum.

What and when.

When the markets are going up you should be long the strongest shares in the market. When markets are grind down you should sell/short the weakest one. Simple, yet often ignored.

Embrace both sides.

Technicals and fundamentals. Understand the underlying drivers of the market, and trade according to the technical signals. When the confirm each other you have a trade.

Keep it simple.

Don’t overcomplicate things. You should be able to easily explain your whole trading system to someone on a piece of paper. Stick to the basics and be disciplined. Remember you reward-to-risk ratio.

The public at large.

When your everyone is jumping on the bandwagon then you should be cautious. But when everyone else is in despair then you should start looking for good opportunities.

Patience is a virtue.

Why take quick profits but hang on to losing trades? Keep a tight stop and let the profit run. The only time this doesn’t apply is in an uncertain bear market – where the tight stop should still be in place, but you may take profits quicker.

Quickly.

The bull comes up the stairs but the bear jumps out the window. Embrace quick market corrections to the down side. The are more volatile and quicker than the up ticks.

Stick to the winners.

Add to your winning trades and cut your losing trades. Be patient with your profitable trades, let the profits run, but eliminate the losers quickly.

And remember,

Markets can remain irrational for longer than you can stay solvent. Don’t get caught as on of the irrational players.

9 Ways to Fight Stock Market Stress

We all know stress is bad. As a Trader/Investor, it is imperative that you stay on your game from Monday to Friday. So how do we fight stress? The key is to stay calm and disciplined. Do not get too involved by the second-to-second moves, keep focusing in your bigger picture. And do not take on too much risk in any single trade.  Here are our top ways to fight market stress:

Have a strategy.

If you work according to a plan then every buy and sell will fit into a bigger picture. This will greatly reduce stress as you have the knowledge that even if this one call doesn’t work out then you have provided for it in your plan.

Know your levels.

When you enter a trade you must already have your predetermined entry and profit and stop loss levels in place. Because when you get to those levels you should be ready to take action, whether it is taking profit or closing a losing position. You should never sit in hesitation of what to do.

Refresh your portfolio balance once a day.

Don’t get distracted by the quick intraday moves. You know your strategy and you have your risk management in place. You know the maximum loss for any individual trade. Why then sit and stare at the P/L screen all day? It the position goes south then you simply cut it and move on. Do not induce unnecessary stress.

Reward to risk ratio.

Always trade so that you can make at least 2x the amount in profit of what you stand to lose when the position goes to your stop loss level. With this 2:1 ratio you can be correct on less than half of your trading calls and you would still be in the money. This should give you peace of mind.

People around you.

Don’t surround yourself with stressed individuals. Look at how your colleagues handle stress. The people around you will have a big influence on your own mindset. Do not get sucked into negative thoughts or emotional investing. Always stay cool, calm, and collected. Be an example for others.

Consider the source.

If you have the TV switched on all day then you will inevitably hear a number of vastly contrasting opinions. Ignore then sensation and focus on the numbers. Don’t get sucked into the noise in-between. This alone will put you much more at ease.

Get enough sleep.

Aim for 6-8 hours every day. The extra rest will serve you well when you find your stocks opening the wrong way. You’ll be able to react and respond much better to the different trading challenges you will encounter during the day.

Eat healthy.

Avoid the junk food. If your body is not at ease then your mind will not be at ease and your stress levels will go up. This applies to more than just trading. Look after your body. And drink plenty of water to keep you alert and well-nourished.

Stay calm.

Don’t start to panic in tense situations. These will come, you can count on it. Handle them with ease. It may be that you find your portfolio down several percent in a single day; or it may be that you have to act on a unexpected company event or earnings report for the stock that you trade. Stop. Think. Then act.